Canadian Utilities Q2 2025 slides: 3% earnings growth, major projects advancing

Canadian Utilities Limited (TSX:CU) presented its second quarter 2025 results on July 31, showing modest earnings growth and significant progress on major infrastructure projects. The company continues to execute its multi-billion dollar capital expenditure plan while expanding its natural gas storage capabilities and advancing hydrogen initiatives.

Quarterly Performance Highlights

Canadian Utilities reported adjusted earnings of $121 million for Q2 2025, representing a 3% increase from $117 million in the same quarter last year. The growth was driven by several factors including positive contributions from ROE and ECM ($4 million), electricity generation ($4 million), ATCO Australia ($4 million), and financing and other segments ($2 million). These gains were partially offset by a $6 million decrease in the ATCO EnPower segment.

As shown in the following earnings waterfall chart, the company maintained its growth trajectory despite some headwinds:

Cash flow performance was particularly strong, with year-to-date cash flows from operating activities reaching $1,078 million, up from $973 million in the comparable period of 2024. This 10.8% increase provides solid support for the company’s ambitious capital program. Meanwhile, capital expenditures rose to $783 million year-to-date, compared to $638 million in the same period of 2024.

The following chart illustrates the relationship between operating cash flows and capital expenditures:

Capital Expenditure Plans

Canadian Utilities outlined an extensive three-year capital expenditure plan totaling $5.8 billion through 2027, designed to achieve a mid-year rate base CAGR of 5.4%. The plan shows a progressive increase in annual spending, starting at $1.5 billion in 2025 and rising to $2.5 billion by 2027.

The capital program is strategically balanced across four key areas: electricity distribution, natural gas distribution, electricity transmission, and natural gas transmission. Notably, electricity distribution investments are set to increase dramatically, from $0.4 billion in 2025 to $1.6 billion in 2027, reflecting the company’s focus on grid modernization and capacity expansion.

This comprehensive breakdown of planned capital expenditures is shown in the following chart:

Major Projects and Initiatives

Two flagship projects feature prominently in Canadian Utilities’ growth strategy: the Central East Transfer-Out Project (CETO) and the Yellowhead Pipeline Project.

The CETO project, representing a $280 million investment, includes 85 km of 240 kV double-circuit powerline and will connect customers to renewable generation in Central East Alberta. Construction has already begun following the completion of detailed design in Q3 2024, with a target in-service date of Q2 2026.

The more substantial Yellowhead Pipeline Project, with an estimated cost of $2.8 billion, will span 230 km with a capacity of 1.1 Bcf/d. This project will release additional capacity on existing pipelines to meet demand in other regions. Pre-FEED (Front End Engineering Design) was completed in Q2 2024, with construction expected to start in Q3 2026 and an in-service target of Q4 2027.

The detailed timeline for these projects is illustrated in the following chart:

Canadian Utilities is also pursuing hydrogen opportunities through the ATCO Heartland Hydrogen Hub (AH3). The company aims for 20-25% ownership in this initiative, which depends on policy support, risk-sharing mechanisms, and funding. Greater certainty in these areas will lead to Front End Engineering Design (FEED), offtake and partner approval, and ultimately a final investment decision.

The following image outlines the key requirements for hydrogen project development:

Strategic Growth Areas

Natural gas storage represents a significant growth opportunity for Canadian Utilities. The company has consistently expanded its storage portfolio, with capacity more than doubling from 52 PJ in 2020 to 117 PJ in 2024. Further growth to 130 PJ is projected by 2025.

This expansion is driven by several factors including long-term natural gas production growth, power markets’ reliance on gas storage, strong North American storage fundamentals, and a tight market with limited new capacity. Canadian Utilities’ strategic positioning in this sector is evident in the following chart:

The company has also demonstrated operational resilience in the face of environmental challenges. With over 50 active wildfires in Alberta this year (and over 800 extinguished), Canadian Utilities has taken extensive preventative measures, including wrapping over 75,000 distribution poles and 35,000 transmission poles. The company reported no material damage to its assets from the wildfires.

Forward-Looking Statements

Canadian Utilities expressed disappointment with the Alberta Utilities Commission’s position regarding the PBR2 re-opener process and is pursuing appeals of both the Phase I and Phase II Decisions. The company highlighted that it has achieved over $500 million in savings in distribution costs, which will continue to benefit customers during the 2023-2028 period.

Looking ahead, Canadian Utilities is well-positioned to execute its capital plan with strong cash flows supporting strategic investments. The company’s portfolio of cash flow-generating assets provides a solid foundation for long-term growth, particularly in electricity distribution, natural gas storage, and hydrogen initiatives.

The stock closed at $39.04 on October 14, 2025, down 0.36% for the day, but remains near its 52-week high of $39.68. With its consistent performance and clear growth strategy, Canadian Utilities continues to focus on infrastructure development and energy transition opportunities while maintaining operational excellence across its diverse portfolio.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.